School District Fiscal Oversight and Intervention

This report provides an overview and assessment of the state's comprehensive system for monitoring the fiscal condition of school districts. Under this system, County Offices of Education review the fiscal condition of school districts at several points during the year and provide additional support for districts showing signs of fiscal distress. In the most serious case—when a district no longer appears able to meet its financial obligations—the state provides the district with an emergency loan and assumes administrative control.
Our review indicates that the oversight system has been effective in preserving school district fiscal health and preventing districts from requiring an emergency loan. Most notably, during the more than 20 years the new system has been in effect, 8 districts have received emergency state loans whereas 26 districts required such loans in the 12 years prior to the new system. Additionally, the number of districts experiencing fiscal distress has increased in tight budget times, but without a corresponding increase in the number of emergency loans required. This suggests the system’s structure of support and intervention is serving a critical early warning function—allowing districts to get the help they need while fiscal problems tend to be smaller and more manageable. Given its effectiveness, we recommend preserving the existing system, as it has shown to be a vital tool for fostering the ongoing fiscal well-being of districts.